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ADVANTAGE AND DISADVANTAGES

BUSINESS ENTITY / ADVANTAGES / DISADVANTAGES
|Proprietorships ~ |ADVANTAGES |DISADVANTAGES |
| | | |
|Individually owned|Control (direct) |unlimited liability |
|No separate legal status apart from their |Simplicity ~ easy to operate/flexible |management ~ professional managers are |
|owner |Lower expense ~ informal accounting and no |rarely hired; no one else to carry on |
||SEC req’s; fewer and simpler legal issues |business after death of the owner |
| |Taxes ~ business is not taxed separately; |Transferability ~ ownership cannot be |
| |income and expenses pass straight to the |readily sold |
||owner | |
|Partnerships ~ |Control ~ simply dispersed among partners |unlimited liability |
|Association of 2 or more |by agreement; direct between ownership and |transferability ~ a partner cannot sell |
|Carry on business|control |his/her ownership interest |
|For profit |Simplicity ~ lots of flexibility | |
|As co-owners |Less expensive to operate than a | |
||corporation (but liquidation may be more | |
| |expensive) | |
| |Taxes ~ not separate | |
|Limited Partnerships ~|limited liability (for limited partner |unlimited liability for general partner |
|general partner operates the business |only) |Transferability ~ limited partners can’t |
|one or more limited partners invest $$ but |separate ownership & control (for limited |readily sell their interest unless it’s |
|do no participatein mgmt |partners) |registered under the federal securities |
| |expenses ~ generally lower for operations |laws |
| |b/c simpler mgmt; must make an initial |Taxes ~ may be complicated because broadly |
||filing |held corporations are taxed like |
| | |corporations |
|LLC’s ~ |limited liability |Accounting ~ may be more complicated than ||incorporated partnership |separate ownership & control ~ maximum |in a simple partnership |
|members can be passive or actively |flexibility |Transferability ~ restricted by the terms |
|participate in management |Expenses ~ business structured freely under|of the Operating Agreement; sale of |
|...
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